Over the past few months, Facebook and Google have been waging a war of sorts with the Australian government. The disagreement originates from a draft of the News Media Bargaining Code which was released at the end of July 2020. The Australian Competition and Consumer Commission (ACCC) had sought comments on the code, which essentially helps news organisations to collectively strike an equitable revenue-sharing deal with Google and Facebook.

Both Google and Facebook have, unsurprisingly, reacted to the draft code with hostility. Google released an open letter, warning its Australian users that the code would lead to a dramatic drop in search results on both Google Search and YouTube. The company said that users’ data, which Google had kept safe, would fall into the hands of media businesses. Facebook went a step further and threatened to stop publishers from sharing news on Facebook and Instagram if the code goes through in its current form.

Australia’s prime minister Scott Morrison has not taken well to Facebook and Google’s reactions. Morrison said he didn’t react well to coercion, according to a report by the Sydney Morning Herald. He urged the two companies to engage constructively in the discussion.

What is the debate about?

The ACCC’s Bargaining Code is a result of discussion about how much share of the pie digital platforms such as Google or Facebook deserve when it comes to publishing news content, and whether they are profiting from such content disproportionately compared to news publishers.

  • Code deals only with Facebook and Google: The News Media Bargaining Code is relevant to only Facebook and Google. It takes into consideration Facebook’s News Feed, Instagram and Facebook’s News Tab (if, and when it is launched in Australia) and Google’s Search, News and Discover services.

Publishers need digital platforms to survive, thrive: It is almost universally accepted that news publishers cannot survive without a presence on digital platforms such as Google, Facebook, Twitter and YouTube (owned by Google). Publishers use these companies to extend their reach on the internet. For instance: A user’s chance of finding a particular news report is far higher if it is optimised to Google’s search algorithm and can appear on Google’s aggregator “Google News”. Similarly, publishers can reach millions of Australian users on Facebook directly only if they have some presence on it.

Users prefer to find news using search and social media: Trends in the digital news ecosystem have led to a situation where people prefer using search and social media to find their news to visiting the publishers’ websites or apps directly. The Digital News Report 2020, published by the University of Canberra in June 2020, confirmed these observations: “The number of consumers going directly to news brand websites or apps for news is declining and indirect access to news on digital platforms is increasing, particularly among older generations […] news consumers are trying to find efficient ways to curate and organise the vast amount of news available to them. A growing number of people are accessing news through mobile alerts, newsletters and aggregator apps.”

The report noted that the use of social media has increased from 46% in 2019 to 52% in 2020, again indicating how crucial a presence on platforms like Facebook is for publishers.

A symbiotic relationship between publishers and platforms

Both Facebook and Google need news to be a part of their offerings for users to derive value from them. For instance, Facebook is the most popular social media platform in Australia, and the primary source of news for 39% of citizens according to the Digital News Report 2020. Similarly, “News” is one of the main tabs that Google’s search categorises its results in.

However, both Facebook and Google have tried to downplay the importance of news in their businesses. In June, before a draft of the Code was published, Facebook had said that pulling news from its platform would not impact its business greatly. Google Australia’s head Melania Silva had said that the company derived very little economic value from news content in Search.

But not a fair balance between the two

News publishers believe, and the Australian government seems to agree, that Google and Facebook benefit a lot more than them. This can be explained through an example: A user searches “Australia bushfires” on Google. She finds several results from news websites on the the first page of the search results. When she goes to the “News” tab of the search results, she would find even more results, each with snippets or summaries from news reports. After reading this snippet, she might not want to click on the link anymore. Similarly, news reports shared on Facebook also have snippets and summaries attached within. Hence, in both cases, Google and Facebook have received online traffic, but deprived the news websites of the same. This ultimately leads to a drop in digital ad revenue for the websites.

Even more succinctly put, both news websites and Google and Facebook compete for digital ad revenues, hence both groups have an adversarial relationship, along with a symbiotic one.

What the News Media Bargaining Code hopes to achieve

Publishers want a larger slice of the pie, but owing to the size and scope of Google and Facebook, they are too small to have any bargaining power. The ACCC wants publishers and platforms to arrive at a deal on their own, leaving a large amount of room to operate for both parties. Publishers may or may not choose to bargain for a share of Google and Facebook’s sizeable digital advertisement revenues.

Share crucial traffic and algorithmic data with publishers: However, the Code requires Facebook and Google to share data with publishers the data they collect on users who access their content. It also makes it mandatory for platforms to provide information in advance on any changes they make to their algorithmic ranking and presentation of news. The ACCC believes that this data would provide publishers with insight on who their target audience is, and what they can do to improve their services.

However, if both parties do not reach an agreement within three months of negotiations, the ACCC would commence compulsory arbitration. The Australian Communications and Media Authority (ACMA) would choose arbitrators, whose ruling would be binding on all parties.

How Australia’s attempts differ from those of other countries

Australia is not the country that has had disagreements with Google and Facebook on matters of news publishing. Earlier this year, France’s competition authority forced Google to negotiate with news publishers and pay them for news snippets it shows in its search results.

In 2014, Spain had passed a similar law that led to Google no longer offering Google News in that country. A 2017 study found that this had led to a 20% drop in readership of news websites.

In 2014, Axel Springer, one of Germany’s top publisher, chose to block Google from showing snippets from its articles. However, it reversed the decision quickly after it led to a drop in site traffic.

Closer home, in the US, both companies have been under intense scrutiny in the form of antitrust proceedings. In hearings before an antitrust committee, the CEOs of Google and Facebook were accused of contributing to the downfall of the news publishing industry due to their predatory advertising models.

The difference with the response from other countries to that of Australia is that the discussion isn’t only about the sharing of advertising revenue. The Code hopes to empower publishers with data about their readership and search and ranking algorithms, thereby allowing them to no longer be at the mercy of Google and Facebook. With this data available with them, publishers can try and strike a deal with these companies without a fear of being down-ranked, since the ranking algorithm would be accessible to them now. Hence, Australia’s success, or failure, will be watched closely by countries across the globe, many of whom are struggling to tackle the growing ubiquity and power of social media giants.

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